The word was coined as a nonsensical term with religious undertones in the Discordian religious text Principia Discordia (1965) by Kerry Thornley and Greg Hill, but was popularized by The Illuminatus! Trilogy (1975) of satirical conspiracy fiction novels by Robert Shea and Robert Anton Wilson.[3] Illuminatus! was produced, in the United Kingdom, as a cycle of plays by anarchic theatre director Ken Campbell and his Jungian Science Fiction Theatre of Liverpool. The plays popularised the term.

In these novels, the interjection "fnord" is given hypnotic power over the unenlightened. Under the Illuminati program, children in grade school are taught to be unable to consciously see the word "fnord". For the rest of their lives, every appearance of the word subconsciously generates a feeling of uneasiness and confusion, and prevents rational consideration of the subject. This results in a perpetual low-grade state of fear in the populace. The government acts on the premise that a fearful populace keeps them in power.

In the Shea/Wilson construct, fnords are scattered liberally in the text of newspapers and magazines, causing fear and anxiety in those following current events. However, there are no fnords in the advertisements, encouraging a consumerist society. It is implied in the books that fnord is not the actual word used for this task, but merely a substitute, since most readers would be unable to see the actual word.

To "see the fnords" means to be unaffected by the supposed hypnotic power of the word or, more loosely, of other fighting words. The term may also be used to refer to the experience of becoming aware of a phenomenon's ubiquity after first observing it. The phrase "I have seen the fnords" was graffitied on a British railway bridge throughout the 1980s and 1990s, until the bridge was upgraded. The bridge is known locally as "Anarchy Bridge". It is located between Earlsdon and Coventry city centre. The bridge and the phrase were mentioned in the novel A Touch of Love by Jonathan Coe.